June 22 (Bloomberg) -- U.S. and European stocks tumbled, extending losses from
the first weekly decline for global equities in more than a month, as the World
Bank said the recession will be deeper than previously forecast. Treasuries
rose, while oil fell below $67 a barrel and metals slumped.
Freeport-McMoRan Copper & Gold Inc., Alcoa Inc. and BP Plc lost more than 3.8
percent amid a 2 percent retreat in the Reuters/Jefferies CRB Index of 19 raw
materials. Bank of America Corp., the biggest U.S. bank by assets, dropped 6.1
percent as two board members resigned. Walgreen Co., the second-largest U.S.
drugstore chain, declined 5.6 percent after reporting earnings that trailed
analysts’ estimates.
The Standard & Poor’s 500 Index slid 2.5 percent to 897.9 at 12:43 p.m. in New
York following last week’s 2.6 percent slump. The Dow Jones Industrial Average
sank 167.92 points, or 2 percent, to 8,371.81. Europe’s Dow Jones Stoxx 600
fell 2.8 percent and the MSCI World Index decreased 2.4 percent. Almost 10
stocks fell for each rising on the New York Stock Exchange.
“The worries are still out there,” said John Wilson, who helps oversee $120
billion as chief market technician at Morgan Keegan & Co. in Memphis,
Tennessee. “Nobody is ready to get the trumpets out and herald the end of the
recession.”
Stocks and commodities slid as the World Bank said unemployment and poverty
will rise in developing nations and predicted a 2.9 percent contraction in the
global economy this year. That compares with a prior estimate of a 1.7 percent
decline. Growth is expected to return in 2010 at 2 percent, less than the 2.3
percent forecast about three months ago.
Rebound Pared
While the S&P 500 is still up 33 percent from a 12-year low on March 9, the
index has fallen 5.1 percent since June 12. Executives at U.S. companies are
taking advantage of the biggest stock-market rally in 71 years to sell their
shares at the fastest pace since credit markets started to seize up two years
ago. Insiders of S&P 500 companies were net sellers for 14 straight weeks as
the market rallied, according to data compiled by InsiderScmaore.com.
The S&P 500 today slid below 900.8, its average level over the past 200 days,
in a bearish signal to analysts who study charts to predict market movements.
Nouriel Roubini, the New York University economics professor who predicted the
financial crisis, said the global economy may suffer another slump due to the
potential “double whammy” of rising oil prices and widening budget deficits.
“I see the worry of a double whammy” from energy costs and fiscal burdens,
increasing the risk of a setback in the economic recovery, Roubini told a
conference in Paris today. Oil may rise to $100 a barrel, he said.
Commodities Slump
Freeport-McMoRan, the world’s largest publicly traded copper producer, plunged
9.4 percent to $46.14. U.S. Steel sank 7.2 percent to $34.87. Alcoa decreased 7
percent to $10.23. The strengthening dollar dulled the appeal of commodities as
an alternative investment, helping send copper, gasoline and oil prices lower.
Exxon Mobil Corp. retreated the most in a month, losing 2.7 percent to $69.13.
BP, Europe’s second-largest oil company, lost 3.8 percent to 478 pence in
London. Crude oil fell for a second straight day in New York, slipping as low
as $66.58 a barrel, on concern that fuel demand will remain depressed.
Commodity shares declined even as Anglo American Plc rallied 4.6 percent after
Xstrata Plc proposed a “merger of equals” with the mining company.
Bank of America tumbled 6.1 percent to $12.41 for the steepest intraday
decline since May 15. The lender that took $45 billion in U.S. aid said board
members Tommy Franks and Joseph Prueher resigned, pushing the total of
departing directors to seven since April.
Walgreen Earnings
Walgreen lost 5.6 percent to $29.68. The company reported profit of 53 cents a
share, missing the average analyst estimate by 6 percent, according to
Bloomberg data.
CarMax Inc. declined 5.9 percent to $14.41. The biggest U.S. used-car dealer
was cut to “hold” from “buy” at Deutsche Bank AG, which said the risk-reward
ratio for the company’s stock is more balanced after its recent rally.
Federal Reserve officials on June 24, at the conclusion of their two-day
meeting, may say the U.S. is showing signs of emerging from the worst recession
in a half century. Following their last meeting in April, policy makers said
the economy will “remain weak for a time.” The central bankers will also keep
the benchmark interest rate in the range of zero to 0.25 percent, economists
said.
Apple Slips
Apple Inc. slipped 1.8 percent to $136.97 even after saying it sold more than
1 million iPhone 3G S units in the device’s opening weekend. Piper Jaffray &
Co. predicted sales of about 750,000 after initially forecasting 500,000 in the
debut weekend. Apple also said 6 million people have downloaded its new iPhone
3.0 software in the five days it’s been out.
Apple Chief Executive Officer Steve Jobs had a liver transplant about two
months ago, a person familiar with the matter said. Jobs, a cancer survivor,
went on medical leave in January after saying he wanted to take himself out of
the limelight and focus on his health. Apple should disclose whether he had a
liver transplant if he returns to work this month in the role of CEO, corporate
governance experts said.
Treasuries advanced for a second day as the World Bank forecast made it more
likely the Fed will keep interest rates near zero for longer. Traders reduced
bets the central bank will raise borrowing costs, according to futures on the
Chicago Board of Trade.
The S&P 500 lost 2.6 percent last week, its first drop in more than a month,
as a decline in crude oil hurt fuel producers and Standard & Poor’s downgraded
the credit ratings of 18 banks.
To contact the reporter on this story: Lynn Thomasson in New York at
lthomas...@bloomberg.net .
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